Sunday Dialogue: More Regulation, or Less?

June 1, 2013

Readers discuss government’s proper role in the marketplace.

To the Editor:

In a recent and bewildering article, The Times reported that Texans remain wary of government regulation even after a fertilizer explosion killed 14, one of the worst industrial disasters in decades. Even though Texas has the nation’s worst record on workplace fatalities, businesses can “do pretty much what they want to,” as one Texan observed.

Our regulatory system is a flash point for many. Simply stated (and admittedly oversimplified), the anti-regulatory faction posits that the free market’s “invisible hand” takes care of itself and “bad actors” are eventually eliminated from the marketplace. Regulations, it contends, stifle business and innovation.

On the other side, proponents of regulation contend that unbridled capitalism inevitably leads to excess, fraud and harm. They trace a line from the Triangle shirtwaist fire to thalidomide-related birth defects to the 2008 financial crisis to the Bangladesh factory collapse. Effective regulations might have prevented those unfortunate events.

Regulation — like beauty — is in the eyes of the beholder. There is no dispute that regulations carry increased costs and are sometimes excessive. Nonetheless, most believe that effective regulation is required and beneficial in a complex society.

I recently attended the annual shareholders’ meeting for Berkshire Hathaway, Warren Buffett’s company. Mr. Buffett said, “It is in our self-interest to conduct our operations in a manner that earns the approval of our regulators and the people they represent.” He understands, presumably, that such scrutiny is a legitimate price to pay to live in a society where legal rights are respected and enforced. Moreover, he understands that compliance is profitable.

What is needed is more regulation and tighter enforcement. Moreover, businesses that do not comply should bear the economic consequences of their misdeeds. There should not be any caps on damages recoverable because only then will business do the right thing.

The laissez-faire doctrine developed in the 18th century is a relic not appropriate for the 21st century. Mr. Buffett understands that perfectly. Why don’t others?

MARC CHAFETZ Washington, May 27, 2013

The writer is a lawyer.

Readers React

To steal from Winston Churchill, government regulation is the worst form of oversight, except for all others. In its absence we return to the days of robber barons, badly polluted water and air, unbridled corruption and greed on Wall Street, banks vulnerable to collapse, contaminated food, tainted drugs, unsafe air travel and deathtrap automobiles.

Regulation is costly, inefficient and frustrating, and much better than the alternative. History proves conclusively that unregulated free markets are incapable of reining in the excesses of capitalism, which must be tempered through government meddling. It is ugly, but it works.

JEFF SCHWEITZER Spicewood, Tex., May 30, 2013

The United States has had a regulatory structure since its founding. History reveals that there are alternating cycles in which government is seen as a valuable and active partner in our social and economic lives, or as a serious problem to be avoided.

What our research demonstrates, however, is that government regulation, of both the economy and the civic sphere, has enriched the lives of Americans throughout history. To be sure, we can point to an array of government failures, and those failures must be corrected either through reform or, when appropriate, deregulation.

Over the last three decades, antigovernment rhetoric that extols markets and demonizes government has captured the public conversation. That rhetoric, however, is deeply flawed. Markets cannot exist without government support, whether it is to enforce a contract, protect the civil rights and civil liberties of the weakest among us, or establish and sustain competitive markets.

The real issue is not about the size of government or the amount of regulation; rather, the challenging issue is to find the right mix of government and markets in the name of the common good.

JOSEPH P. TOMAIN SIDNEY A. SHAPIRO Cincinnati, May 29, 2013

The writers are professors at the University of Cincinnati College of Law and Wake Forest School of Law, respectively, and the authors of the forthcoming book “Achieving Democracy.”

Mr. Chafetz overstates his case. The choice is not necessarily between more and less regulation. The choice should be between effective regulations, well enforced, and the confusing and poorly enforced system of regulations we have now (such as the tax code).

He states that “what is needed is more regulation and tighter enforcement.” Why is that? Is there no end to the number of regulations we need? There should be a cost-benefit analysis before enacting any new regulations. Advocates of endless regulations are attempting to achieve the impossible: perfection of society.

An example is my own profession of medicine. New regulations pour out of Congress like a flood, often with no provision to pay for them. Many are rooted in initially worthy goals, but ultimately, in an attempt at perfection, lead to diminishing returns for escalating costs in time, money and morale.

JEFFREY A. RAPP Healdsburg, Calif., May 29, 2013

Historically, regulation was perceived by advocates of small government as problematic for two main reasons. From a political perspective, it was seen as beyond the purview of what government should be doing, which ideally was nothing more than ensuring public order and stable money. From an economic perspective, it was seen as inefficient.

If regulation was intended to prevent the public from harm (for example, pollution, unsafe working conditions or hazardous products), litigation was construed as a more efficient way to ensure that outcome. The threat of having to pay damages to an injured party was to provide sufficient disincentive to industry to engage in unsafe practices.

What is so disturbing about the tort reform movement, supported by industries and legislators that also rail against regulation, is that it leaves the public with no recourse against corporate excess. Not only are we subject to harm from unregulated industry, but awards for the damages we suffer are limited as well.

Calls for tort reform and against regulation are not ideological, despite what right- and libertarian-leaning legislators affirm. They are cynical and antisocial.

SHARI JACOBSON Selinsgrove, Pa., May 29, 2013

The writer is an associate professor of anthropology at Susquehanna University.

Keith Negley

Even if markets discipline “bad actors,” we suffer severe repeat offenders, about whom the regulatory system fails. Think of BP’s record of violations even before the Gulf of Mexico spill, or charter bus operators singled out by the secretary of transportation, or food producers that repeatedly jeopardize our health.

More than “damages recoverable” is needed. Severe repeat offenders should be subject to receivership, replacing their boards or other management.

ROY A. SCHOTLAND Washington, May 29, 2013

The writer is professor emeritus at Georgetown Law Center.

As Mr. Chafetz points out: “The anti-regulatory faction posits that the free market’s ‘invisible hand’ takes care of itself and ‘bad actors’ are eventually eliminated from the marketplace. Regulations, it contends, stifle business and innovation.” A self-serving argument if there ever was one.

If only the “bad actors” were harmed when conducting their business loosely, perhaps there would be some element of natural justice involved. But too often the irresponsible actions of “bad actors” hurt innocents, people with no opportunity to ensure that the business was conducted responsibly. Those are the people whom regulations are intended to protect. And they should be protected.

DAVID M. BEHRMAN Houston, May 29, 2013

Businesses pay for their misdeeds by losing customers and profits. Businesses should be held legally liable for damages they cause, but beyond that there is no need to involve the government in the process.

In general, there is no need for the government to be involved in any transactions that are entered into voluntarily; these transactions can be regulated by the buyer and the seller. The proper role of the government is to regulate where buyers and sellers do not. For example, residents of a town who may be exposed to danger by the building of a factory have a legitimate basis to involve themselves by means of government safety regulations. The same argument is the basis for environmental regulations that protect air and water from pollution.

The problem with the current state of government involvement in our daily lives is that the overwhelming majority of it — from employment regulations to “consumer protection” laws to the Americans With Disabilities Act — is not regulation but interference, and we are drowning in it. There are legitimate areas for government regulation; if the government would focus on these and let the rest alone, it would do a better job of regulating, and we would all be better off.

DENNIS CANFIELD Western Springs, Ill., May 29, 2013

Mr. Chafetz wonders why so many people oppose lifesaving regulations. Since words powerfully shape our emotional responses, what if we substitute the word “standards” for “regulations”?

“Regulation” evokes feelings of constriction, constraint, holding back; so it is little wonder that many see regulation as a barrier to progress. The word “standards” carries many positive associations as what most people aspire to uphold.

The term “fuel efficiency standards,” for example, carries a positive connotation to many, perhaps easing their upgrade passed last year. Might “fuel efficiency regulations” have suffered a different fate? Words have tremendous power.

FRANCES MOORE LAPPÉ

Cambridge, Mass., May 29, 2013

The writer is the author of “Diet for a Small Planet” and other books.

Regulation is a reactive mechanism. It usually attempts to fix a problem that has already happened so that it doesn’t happen again. It cannot predict the future, however, and therefore, cannot fix new problems before they happen.

Civilization does advance, however, when regulation pushes society in new directions. Regulators pushed utilities to bury cables underground rather than hang them from poles, exposing them to the vicissitudes of the weather. Regulators pushed factories to clean up their smokestack emissions, leading to cleaner air. Regulators broke up the telephone monopoly, leading to competition and diversification in telecommunications.

So the problem, right now, is that the message about regulation is steeped in pessimism, and the optimists have been drowned out. When we acknowledge regulation’s flaws, but adopt its hopeful guidance for the future, we will feel better about it as a nation.

STEVEN A. GLAZER Bowie, Md., May 29, 2013

The writer is an administrative law judge.

The Writer Responds

Mr. Schweitzer makes the case for regulation better than I did: Regulations can be ugly, but are nonetheless necessary to curb the inexorable excesses of the marketplace.

Professor Jacobson addresses the importance of litigation and business’s risk of paying damages as a disincentive for unsafe practices. One problem, however, is that certain types of lawsuits have been eliminated by the Supreme Court (such as failure-to-warn suits against generic drug makers). This means that seriously injured people have no recourse.

Mr. Canfield’s position — that buyers and sellers can regulate themselves reasonably — comes from a different planet than mine. I do not agree that we are drowning in regulations, especially employment regulations, consumer protection and the Americans With Disabilities Act. Many Americans from all political spectrums would agree that such laws and regulations have immeasurably improved this country.

Professor Schotland raises an intriguing idea for severe repeat offenders: that the company be placed in receivership and current management and board fired. Does anyone doubt that under such an approach unsafe conditions would plummet? This is also why there should not be any cap on damage awards.

Dr. Rapp makes a point that I had hoped was implicit in my letter — that there should be better regulations that are effectively enforced. The tax code would be a prime example for overhaul. Regarding his point about cost-benefit analysis, that is already the case under several statutes. Frankly, a danger is the likelihood that business would hire economists to “demonstrate” why any new regulation was harmful.

For some time there has been an active campaign against government that is no doubt promoted and financed by business. Professors Tomain and Shapiro indicate that their research demonstrates the effectiveness of regulations for improving Americans’ lives. They also point out that the success of American business is to a large extent attributable to the government’s support.